- Call Money Rate
The interest rate on a type of short-term loan that banks give to brokers who in turn lend the money to investors to fund margin accounts. For both brokers and investors, this type of loan does not have a set repayment schedule and must be repaid on demand.
Trading on margin is a risky strategy in which investors make trades with borrowed money. The advantage of margin trading is that investment gains are magnified; the disadvantage is that losses are also magnified. When investors trading on margin experience a decline in equity past a certain level relative to the amount they have borrowed, the brokerage will issue a margin call that requires them to deposit more cash in their account or to sell enough securities to make up the shortfall.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
Call money rate — Also called the broker loan rate , the interest rate that banks charge brokers to finance margin loans to investors. The broker charges the investor the call money rate plus a service charge. The New York Times Financial Glossary … Financial and business terms
call money rate — Also called the broker loan rate , the interest rate that banks charge brokers to finance margin loans to investors. The broker charges the investor the call money rate plus a service charge. Bloomberg Financial Dictionary … Financial and business terms
call loan rate — See: call money rate … Financial and business terms
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